This article was co-authored by Catherine Valadez Lopez. Catherine Valadez Lopes is a Childcare Center Director in New York. She received her MS in Elementary Education from CUNY Brooklyn College in 2010.

There are 17 references cited in this article, which can be found at the bottom of the page.

Money is an important aspect of everyone's life and should be explained to children at an early age. Toddlers can learn what money is and can use coins to assist them in learning how to count. As the child gets older, they can be taught more complex concepts like the value of money and how to pay for goods and services. Once the child reaches their teenage years they can learn how to open a bank account and make money for themselves by getting a job. If you start teaching children early in their lives, lessons on money will sink in even better as they get older.

Steps

Method1

Teaching Young Children the Basics

1

Use coins to teach 1- to 2-year-olds how to count. If you have a toddler who doesn’t know how to count, start off simple. Give them a coin and say, “This is 1 coin.” Then, give them another coin and say, “This is 2 coins.” Continue doing this until you reach 5 to 6 coins and see if over time the toddler can count them with you.[1]

It may be helpful to repeat the words “one” and “two” to the toddler until they can repeat them back to you.

Be patient with your toddler. It may take several sessions until the child starts repeating the words.

2

Teach 3- to 4-year-old children about coins based on color and size. Teach the child the names of coins, their size, and what color they are. Give the child a handful of coins and ask them to organize them into different piles. Recite the names of the coins and see if they can point to the correct coin or repeat the name after you.[2]

For instance, you can say, “This silver coin is a quarter, and it’s the largest of all the coins. Can you point to another quarter?”

3

Give the child a clear piggy bank and encourage saving. A piggy bank will teach the child how to start saving their money. Giving them a clear jar over a porcelain piggy bank, however, will let them visually see the money pile up. As they start saving more coins, be enthusiastic and encouraging about their saving habits.[3]

You can say something like, “Wow! You’ve saved so many coins since I’ve last looked. Great job!”

You can give a child a piggy bank starting at the age of 2 to 3.

Help your child use a coin machine at the grocery store to show your child how the coins they have saved can be exchanged for dollars.

It’s okay to allow your young child to make purchases, but help them set a goal for saving money as well.

4

Read books to your child that teaches them about money. There are several informative and fun children's books that can help educate your child about money. Search online for titles that you think that your child would enjoy and purchase them online or at a bookstore. Then, read the books to them and explain any lessons that they don’t understand.[4]

Examples include Money Madness, Once Upon a Dime, and One Cent, Two Cents, Old Cent, New Cents.[5]

Method2

Providing Learning Opportunities for Older Children

1

Play “store” with 4- to 5-year-old children to teach them about income. Once the child gets to be about 4-5 years old, you can set up pretend store or restaurant scenarios where you have to pay the child for goods and services. Exchange fake or real money with the child to give them a lesson about working to gain an income.[6]

For instance, you can set up a fake hamburger shop and have the child exchange play-dough hamburgers for money.

2

Teach 4- to 6-year-old children about paying for things. Teach the child that they can’t take things from the store unless they pay for them first. They’ll be able to comprehend this concept somewhere between the ages of 4-6. If the child wants something, explain how much money it costs and whether you can buy it or not.[7]

For instance, if the child picks up a candy bar you can say something like, “We have to pay for that candy bar if you want it. Do you know how much it costs?”

You can also say, "Taking something from the store without paying is considered stealing and could get us in trouble!"

Ask your child questions before you purchase something to get them thinking about how to save money, such as by asking, “That candy bar costs $0.50 less than this candy bar. Which one do you think we should get?”

3

Give children choices based on price. If the child wants more than one thing, give them a choice between things that have a similar monetary value. This will start to make them more conscious about the value of money and about how much things cost. It will also make them realize that money is limited and that sometimes they can’t have everything.[8]

For instance, you can say something like, “You can get 2 pieces of candy that cost $5 or 1 toy that costs $5. You choose.”

4

Provide children with an allowance for finishing chores. Set a list of goals that need to be completed around the house and give them a weekly or monthly allowance for completing the goals. Help the child think of things that they want to save for to help motivate them to complete their tasks. This will give help them understand the value of money and the importance of saving.[9]

If the child doesn’t complete the chores, don’t give them the allowance.

Chores could include washing the dishes, walking the dog, taking out the garbage, cleaning the house, or helping siblings with homework.

For instance, you can say “I know you’ve been saving up for that Xbox, great job. How much do you have so far?”

If you're unsure of how much to give, consider giving them $1 per month for every year they've lived. So for example, if they are 9, give them $9 per month.[10]

Method3

Educating Teens about Money

1

Explain compound interest to 11- to 14-year-olds. Start with whole numbers when explaining compound interest at first. Explain the concepts of earning money by saving with a high-interest rate. Then, use websites (like https://www.investor.gov/) to calculate compounding interest over time. There, the child can do calculations on how much they'd earn at different interest rates.[11]

You can say something like, "If you saved $10 a month until you were 22, you'd have $1,200 but if you started saving in 5 years, you'd only have $600."

You can also say something like, "If you saved $100 in an account with a 15% compounding interest rate over 30 years, you'd have over $6,500!"

2

Help teens get their first job. Search online with the teen and suggest different opportunities that might be beneficial. Businesses are also likely to hire around gift-giving holidays. Visit local businesses around the holidays and ask them if they are hiring. Once the teen gets a job and starts earning their own money, they’ll better understand the value of money and the hard work that it takes to earn.[12]

Help the teen dress for the part and write their first resume. Walk them through the entire job-searching process because it can be overwhelming at first.

The teen can work as a busser, server, cashier, or as a customer service representative in a retail store.

3

Teach them how to budget. Write down a list of your teen’s income and expenses every month and subtract the expenses from the income. This will give the teen a good idea of how much money they can spend after they get paid. Go over the budget with the teen and see where you can eliminate costs so that they can save more.[13]

Creating a budget is also very beneficial if the teen has things they are paying for themselves, like a monthly cell phone bill or car insurance.

If you notice that they spend a lot on clothes or other things they don’t need, talk to them about the value of saving.

For example, if the teen makes $150 per week at their job and their total weekly expenses are around $100, it means they have $50 they can save or use for spending money.[14]

You can create the budget in a spreadsheet instead of using pencil and paper.

Another option is to let your teen use the expense analyst tool on your bank’s website, or an app, such as “You need a Budget.” This will give your teen a visualization of where their money is going.

4

Open a savings account with them so they can save. Some banks will only allow teenagers under 18 to open a bank account with an adult. Take the teen to the bank and talk to a representative about opening up a joint account. This will provide a means for the teen to save money and will give you the power to monitor how they are spending they are money.[15]

Once you set up the account, show them how to use any online banking features.

Walk the teen through setting up their pin number and using the ATM.

5

Show the teen how to fill out their taxes if they have a job. Explain what taxes are used for and the programs that they fund. You should also fill out tax forms with the teen during tax time on websites like TurboTax or H&R Block. Guide them through the steps and explain everything to them as you do their taxes together.[16]

Compare the cost of colleges to teach them about debt and credit. Look at colleges and compare tuition costs with the teen. Explain how the interest on loans will accrue the longer the loan isn't fully paid. Warn the teen about the dangers of credit cards and how their credit score will affect their ability to purchase a car or house in the future.[17]

Advise the teen that they should only get a credit card if they are able to pay it off every month.

Factor in the savings gained through scholarships, grants, and financial aid.

Article Info

FEATURED ARTICLE

This article was co-authored by Catherine Valadez Lopez. Catherine Valadez Lopes is a Childcare Center Director in New York. She received her MS in Elementary Education from CUNY Brooklyn College in 2010.